More articles from Strategies for Retired People
Taking care of your elderly parents has been a rewarding experience. They have done so much for you while you were growing up and becoming an independent adult. Now it is time to do something for them, as you take them to their doctors’ appointments, pick up the groceries and do the light maintenance to their home.
One other way you are taking care of your parents is by doing their taxes and making sure their Social Security is placed into their bank accounts. You heard from a friend that Social Security has to be included on the yearly income forms because it is taxable.
Is this true? Do your parents have to pay taxes on their Social Security?
Most people want to enjoy their golden years of retirement knowing that they will be supplementing their income with Social Security benefits. So many people are caught by surprise when they find out that they actually owe the IRS federal income taxes on this benefit.
To determine if your elderly parents (or yourself) will have to pay taxes, you first must determine how much income they are bringing into their home. Just because your parents have retired from their regular jobs doesn’t mean that they aren’t making income from other places, such as dividends and interest. In addition, some people may still work in their retirement years or become self-employed to make a little extra cash.
According to the Social Security Administration, your parents must meet a certain income threshold to be taxed. They can be taxed as individuals or as a joint couple depending on their income tax filing status. The IRS rules in regards to paying taxes on Social Security are:
Every January your parents will receive a Form SSA-1099: Social Security Benefit Statement. This statement will show how much in benefits your parents received throughout the past year. To calculate your parents’ combined income:
Now that you know whether your parents will have to pay taxes on their Social Security, you can make arrangements to fulfill their tax obligations. There are several options to paying taxes on Social Security such as making quarterly estimated payments or having the taxes federally withheld from their benefits. Choose the best option for your parents so that they can live comfortably without experiencing financial hardships.